New Issue Memorandum IM Cédulas 5 EURO-DENOMINATED BOND OFFERING 1.25bn Cédulas Hipotecarias June 2005 INTERNAL USE ONLY NEITHER THIS DOCUMENT NOR ANY COPY HEREOF MAY BE SENT OR TAKEN OR TRANSMITTED INTO THE UNITED STATES, CANADA OR JAPAN OR DISTRIBUTED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES, CANADA OR JAPAN OR TO ANY U.S., CANADIAN OR JAPANESE PERSON. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS. THIS DOCUMENT IS BEING FURNISHED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED OR REDISTRIBUTED TO ANY OTHER PERSON. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES.
IM Cédulas 5 1.25 billion Cédulas Hipotecarias Due June 2020 (15-Years) Terms and Conditions Issuer: Rating: Bookrunner: Status: Principal Amount: Currency: IM Cédulas 5, FTA AAA (S&P) HVB / HSBC / IXIS CIB Cédulas Hipotecarias (Senior, secured) EUR 1.25 billion EURO Trade Date: [x] June 2005 Settlement Date: [x] June 2005 Maturity Date: [x] June 2020 Call Details: Coupon: None [x]% p.a., payable annually in arrears on [x] June Coupon basis: Principal Redemption: 100% Annual, Act/Act Reoffer Spread guidance: Delivery: Listing: Business Days: [x] bp over midswaps EUROCLEAR / Iberclear AIAF (Madrid) TARGET, excluding non business days in Madrid Denominations: 100,000 Documentation: Spanish Documentation OR TO ANY U.S. OR CANADIAN OR JAPANESE PERSON. 1
SUMMARY OF SALES POINTS 1. Background IM Cédulas 5 is a Spanish FTA ( Fondo ) running and servicing a fund of pooled Cédulas, repacking it and offering a structured covered bond as a joint issue of 7 banks / savings banks. IM stands for InterMoney Titulizacion S.G.F.T., S.A. a company that structures ABS and covered bond transactions. The company is supervised by the CNMV, the Spanish regulator. The 5 means this is the fifth covered bond transaction of IM. InterMoney belongs to Grupo CIMD, which is owned by several banks, ICAP and other investors.. InterMoney has structured, until now, four Structured Cédulas transactions (EUR6.6bn), 3 ABS (cumulated EUR3bn) and 2 RMBS (cumulated EUR1.35bn) transactions. Their first covered bond transaction took place in February 2004. So far, the ABS and RMBS transactions have been structured for Banco Pastor, CajaMar, Banco Sabadell and Banco Popular. Including this issue, the company has helped 23 banks and savings banks in Spain issuing pooled Cédulas. InterMoney is one of the most transparent European covered bond issuers. The following website gives detailed information on all participating banks, the transaction features and rating reports as well as analyst recommendations. The information given on the current and initial level of over-collateralisation is state-ofthe-art. http://www.imcedulas.com The following example is the snapshot of the participating banks in IM Cédulas 3. It shows the initial (picture 2) and the current (picture 1) level of mortgage loans and issued Cédulas. Like for the new IM Cédulas 5 transaction, seven credit institutions took part in IM 3. The transparency helps investors get information on the deal not only when it is launched, but also afterwards updated on a monthly basis. OR TO ANY U.S. OR CANADIAN OR JAPANESE PERSON. 2
2. Overview on Spanish Pooled Cédulas Pooled Cédulas are bonds, backed by individual Cédulas. The individual Cédulas carry the same maturity and a nearly identical coupon as the pooled Cédulas (1bp higher in order to cover the running costs of the FTA). The bond type can be hipotecarias (mortgages) or territoriales (public sector). The IM Cédulas 5 bond is, as all pooled Cédulas by IM, backed by mortgages. The individual Cédulas are issued by a Spanish commercial bank, a savings bank (caja, caixa or kutxa), a rural bank or a co-operative bank. In case of insolvency of a Cédulas issuer the investor has a first claim against total mortgage book. After the amendment of the Spanish insolvency law in 2003 there is a high likelihood that Cédulas (issued by an insolvent issuer) are paid back at their final maturity. The structure set for the transaction IM Cédulas 5 is shown in the following diagram. Liquidity Line Provided by IXIS CIB Interest & principal Interest & principal Cédulas Hipotecarias from 7 Spanish Financial Institutions IM Cédulas 5, FTA [AAA] Notes InterMoney Titulización S.G.F.T., S.A. Management C y of the Fund The characteristics of pooled Cédulas are somewhat different to a plain-vanilla product. The first structured feature is an extended maturity. The legal maturity of the FTA has been set often 2 or 3 years after the final maturity of the bonds to allow the management company to deal with any insolvency procedures that may occur near the final maturity of the bonds. 17 out of 22 transactions have a three-year extension; this issue will have a two-year extension. This was the case for IM Cédulas 2, 3 and 4 as well. The second feature is a subordinated loan (reserve fund) or a liquidity line, which covers a certain percentage of 2-year interest. This reserve fund or liquidity line can come from the system (participating banks) or from external sources. In this transaction the liquidity line is given by IXIS CIB and covers around 45% of the next two coupons of the bonds (3.375% of the transaction). It is the Rating Agency that determines the amount of the Liquidity Line according to, among others, the diversification of the portfolio and the number of individual issuers. Including this transaction, the total market size of pooled Cédulas is EUR49.273bn. This represents 39.1% of the total market size of the Cédulas market and 42.1% of the jumbo Cédulas transactions. OR TO ANY U.S. OR CANADIAN OR JAPANESE PERSON. 3
AyT TdA IM Titulización Issuer Ahorro y Titulización SGFT S.A. Titulización de Activos SGFT S.A. InterMoney Titulización SGFT Website www.cedulascajas.com www.tda-sgft.com www.imtitiulizacion.com Bloomberg-Ticker AYTCED CEDTDA IMCEDI outstanding Cédulas (EUR bn.) 31.163 10.250 7.860 Number of transaction 11 6 5 backed by Cédulas Hipotecarias 9 6 5 number of bonds 15 6 5 whereas private placement 3 0 1 transactions with assigned "AAA" (3 agencies) 9 6 1 transactions with assigned "AAA" (2 agencies) 1 0 2 transactions with assigned "AAA" (1 agency) 1 0 2 participating banks 41 19 23 Cash-reserve in % of the issue size 1,77 % - 3,50 % 2,75 % - 3,20 % 2,63 % - 5,87 % Maturity range Okt. 2008 - Mar. 2020 Nov. 2009 - Mai 2025 Feb. 2014 - June 2020 Issue size (range in EUR bn.) 0,8-3,8 1,5-2 1,06-2,075 not including AyT Nr. 10 not including TdA Nr. 7 incl. IMCEDI Nr. 5 The pooled Cédulas have been a big success since they were first launched in 2001. 56 Spanish credit institutions, mostly savings banks, use nowadays IM, AyT or TdA to refinance their mortgage lending activities via a structured covered bond. Currently 5 commercial banks, 6 member banks of Grupo Banco Popular, 3 Cajas Rurales, 1 Caja Popular and 41 Cajas de Ahorro use the offered service to issue joint Cédulas. Five credit institutions - Caixa Terrassa, Caja España, Caixa Girona and SA Nostra ( Caja Baleares ) (all participating in this issue) and Caixa Manresa - use all three servicing providers. 3. Institutional, Index and Trading Aspects Spanish Cédulas have a preferred risk-weighting of 10% in most European countries. The bonds fulfill the article 22/4 of the UCITS directive, which allows fund managers to extend their issuer limit in an investment fund. The bonds are ECB eligible. Pooled Cédulas do not form a separate bond index. In the FTSE/ PfandTop index the bonds are grouped under the ESPFANDTOP. All rated Cédulas are integrated in the -iboxx index family. The subgroup is Collateralized Covered Spain Covered. The Merrill-Lynch index family has grouped Cédulas with the EMU-Covered Bond INDEX. Expected weightings of the new IM 5 EUR 1.25bn PfandTop 0,23% ES-PfandTop 1,08% iboxx-collateralized 0,22% iboxx-collateralized-covered 0,25% iboxx-collateralized-covered-spain Covered 1,03% Merrill-Lynch EMU-Covered Bonds 0,19% The new bond will be traded with a classical market-making obligation of the covered bond market. The bond will be quoted with a maximum bid-offer-spread of 10 Cents. It is expected that Bloomberg Bond Trading, BondVision and TradeWeb will put the new issue in their B-2-C platform as well. The new bond will be listed on all trading platforms and will likely have a graceful liquidity. The bond cannot be tapped in the future. OR TO ANY U.S. OR CANADIAN OR JAPANESE PERSON. 4
4. IM Cédulas Participating Banks Issuer size in EUR mio. Bloomberg Fitch Moody's S&P IMCEDI Nr. 5 IMCEDI4.25 2/14 IMCEDI4.5 6/14 IMCEDI4 11/14 IMCEDI3.75 3/15 Caja Laboral CAJLAB A+ A2 NR 500 500 200 Banca March - A- A3 NR 250 250 Caja Espana CAESIN A- A2 NR 150 150 Banco de Valencia BVA A NR NR 100 400 100 500 Caixa de Terrassa - A- NR NR 100 150 Caja Baleares CABALE A- NR NR 100 Caixa Girona - A- NR NR 50 Caja Cantabria CACANT NR A3 NR 500 Caja Rural Intermediterranea - A NR NR 500 200 Banco Pastor PASTOR NR A2 A- 200 Caja San Fernando SANFER A- NR NR 125 Caixa Manresa CAIXAM NR A3 NR 80 100 Ipar Kutxa Rural (Caja Rural Vasca) - NR NR NR 100 Caja Insular Canarias CAINSU NR A3 NR 50 50 Banco de Andalucia BANAND AA- NR NR 800 Banco Popular Hipotecario - NR NR NR 300 Banco de Castillia - NR NR NR 275 Banco de Galicia - NR NR NR 250 Banco de Crédito Balear - NR NR NR 225 Banco de Vasconia - NR NR NR 150 Banco Espirito Sancto ESPSAN A+ A1 NR 150 80 Caixa Penedés CAJPEN A NR NR 175 Caixa Tarragona CATARR A- NR NR 50 1250 2000 1475 1060 2075 The following table shows the participating credit institutions in IM Cédulas 5. All of them are rated at least by one agency. And all assigned long-term ratings are between A- and A+. Banca March and Banco de Valencia (owned by Bancaja) are commercial banks. Caja Laboral is a Cooperativa de Crédito. The other four credit institutions are member banks of the Spanish CECA, the savings bank association. Issuer (size in EUR mio.) Bloomberg IMCEDI Nr. 5 total mortgage book eligible mortgage loans eligible ratio issued Cédulas (excl. IM 5) issued Cédulas (incl. IM 5) issued Cédulas in joint structure legal overcollateralis ation economic overcollateralis ation Caja Laboral CAJLAB 500 6.831,7 2.961,6 43,4% 1.500,0 2.000,0 1.900,0 148,1% 341,6% Banca March - 250 2.573,3 1.997,5 77,6% 495,0 745,0 500,0 268,1% 345,4% Caja Espana CAESIN 150 6.974,7 2.924,4 41,9% 1.549,9 1.699,9 1.595,4 172,0% 410,3% Banco de Valencia BVA 100 4.138,1 3.462,3 83,7% 1.000,0 1.100,0 1.100,0 314,8% 376,2% Caixa de Terrassa - 100 3.923,0 2.352,9 60,0% 1.710,0 1.810,0 1.810,0 130,0% 216,7% Caja Baleares CABALE 100 3.873,0 2.994,5 77,3% 881,2 981,2 950,2 305,2% 394,7% Caixa Girona - 50 2.139,3 1.216,9 56,9% 425,0 475,0 475,0 256,2% 450,4% The legal over-collateralisation of Spanish Cédulas (ratio between eligible mortgage loans and Cédulas Hipotecarias) requires a minimum of 111% of eligible mortgages (residential mortgages with LTV under 80% and commercial mortgages with LTV under 70%). This over-collateralisation of 111% is only a legal limit of issuance, as all the mortgage loans on balance sheet will serve as over collateralisation of the Cédulas. The data obtained through IM show that legal over-collateralisation levels are respected. In case of insolvency of a single bank the Cédulas investor has a claim not only against the eligible loans but against the total mortgage book. We have calculated this ratio in the last column and called it economic over-collateralisation. The minimum is currently set by Caixa Terrassa at 216%. OR TO ANY U.S. OR CANADIAN OR JAPANESE PERSON. 5
5. IM Cédulas Loan Description Issuer (size in EUR mio.) total mortgage book average Loan to Value % FRN as a percentage of total mortgage book current average rate (Fixed and FRN), % mortgage loan contracts 1-15y mortgage loan contracts >15 y highest regional concentration Caja Laboral 6.831,7 63,14 99,7% 4,38/3,03 24,4% 75,6% Vizcaya 23,5% Banca March 2.573,3 54,15 99,5% 3,98/3,38 52,7% 47,3% Baleares 61,2% Caja Espana 6.974,7 57,15 99,0% 5,83/3,20 38,5% 61,5% Madrid 29,4% Banco de Valencia 4.138,1 60,27 93,6% 3,41/3,10 43,0% 57,0% Valencia 41,4% Caixa de Terrassa 3.923,0 58,29 99,3% 5,84/3,51 26,4% 73,6% Barcelona 73,9% Caja Baleares 3.873,0 47,96 80,4% 3,41/3,53 42,4% 57,6% Baleares 97,5% Caixa Girona 2.139,3 64,16 86,1% 3,36/3,57 36,8% 63,2% Girona 70,5% The legal maximum of the loan to value is 80% for residential mortgages. The average loan-to-value against historical prices in this transaction differs from 48% (Caja Baleares) to 64% (Caixa Girona). The main parts of the mortgage book are loans with floating interest rate. Only Caja Baleares has a fixed rate loan book that is more than 15% of the total loan book. Due to the high share of FRNs the average interest rate is between 3,03% (for Caja Laboral) and 3,54% (for Caixa Girona). All banks are lenders of long dated mortgages. The breakdown of loans to be repaid before 2020 (maturity of IM Cédulas 5) differs from 24.4% (Caja Laboral) to 52.7% (Banca March). 6. Comparables: Pooled Cédulas and 13-20 year Covered Bonds Pooled Cédulas (per maturity): OR TO ANY U.S. OR CANADIAN OR JAPANESE PERSON. 6
Long-term covered bond (per maturity): OR TO ANY U.S. OR CANADIAN OR JAPANESE PERSON. 7